S&P 500 - Failed Negative?

Last week we noted that the S&P 500 was forming a bearish head & shoulders pattern, one in which gave traders pause when thinking about new long positions. You can find that post and its accompanying annotated chart in the General Market section. Given Monday's sharp rally and yesterday's positive news on Intel, people are asking "where to now?"
The chart below shows several areas of resistance that will need to clear in order to declare the head & shoulders pattern a failed negative. Failed negatives do happen, and they can be powerful when confirmed as it only further empowers bullish sentiment. The first line of resistance is the 50-day moving average (purple line below) which is currently at 912. Looking at where S&P futures are trading this morning in reaction to last night's Intel earnings report, we are looking at gapping open pretty close to 912. If the S&P can close above that level, the next stop is this short term, downtrend the S&P has been in after making consecutive lower highs. That trend line, annotated below, is right around 920. A nice close above 920 starts to break this short term down trend the market has been in and so that level is to be watched very closely. Until then, be careful with new long positions as this market has whipsawed many traders with action that can be best described as a ball bouncing downhill. So long as the slope is down, the long side will be fighting the tape most days so await confirmation that the ball is now bouncing uphill so the tape can be on your side. If you're short, then the short term trend is still your friend and aggressive traders can short these resistance points with tight stops should they be breached.